Fall of global wealth to affect luxury sales worldwide

The combined wealth of all individuals has fallen this year for the first time since the financial crisis of 2007-08, with a drop in austerity-hit Europe outweighing a small increase in China, a Credit Suisse report has found.

The study found the wealth of all individuals – defined as assets such as income, real estate, savings and investments less debt – fell 5 percent in dollar terms to $223 trillion by mid-2012 from the same time the year before.

The main driver of the decline was Europe, where wealth fell 14 percent in dollar terms. But the study also attributed the fall to economic recessions in a broader range of countries, lower equity prices and relatively subdued housing markets. Meanwhile, wealth in China grew 3 percent in dollar terms, the biggest winner this year, Credit Suisse said.

The report published on Wednesday noted the European luxury goods sector had proven resilient, posting organic growth, which excludes acquisitions, at a high-teen percentage in the 12 months to June 30. But Credit Suisse said it was cautious looking through to the second half of 2013, forecasting top-line growth would slow to 7-8 percent with “a high level of uncertainty and no visible prospects of growth acceleration until the second half of 2013.”

It said a weak macroeconomic environment in Europe, rising taxation for the rich and wealth erosion should take its toll on luxury sales in the region, a trend which would be somewhat mitigated by tourist buyers from emerging markets. It also predicted sales momentum in China – the luxury market’s biggest driver of growth – should be impacted by an economic slowdown and a pullback on gift-giving, which would continue to weigh on luxury sales in China until a change in the country’s leadership was complete.